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Circular No. 78/52/2018-GST
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F. No. CBEC-20/16/04/2018-GST
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****

New Delhi, Dated the 31
st
December, 2018
To,
The Principal Chief Commissioners/ Chief Commissioners/Principal Commissioners/
Commissioners of Central Tax (All)/
The Principal Directors General/ Directors General (All)

Madam/Sir,
Subject: Clarification on export of services under GST – Reg.
Representations have been received seeking clarification on certain issues relating to
export of services under the GST laws. The same have been examined and the clarifications
on the same are as below:
Sl.
No.
Issue Clarification
1. In case an exporter of services
outsources a portion of the services
contract to another person located
outside India, what would be the tax
treatment of the said portion of the
contract at the hands of the exporter?
There may be instances where the
full consideration for the outsourced
services is not received by the
exporter in India.
1. Where an exporter of services located in
India is supplying certain services to a recipient
located outside India, either wholly or partly
through any other supplier of services located
outside India, the following two supplies are
taking place:-
(i) Supply of services from the exporter
of services located in India to the
recipient of services located outside
India for the full contract value;
(ii) Import of services by the exporter of
services located in India from the
supplier of services located outside
India with respect to the outsourced

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portion of the contract.

Thus, the total value of services as agreed to in
the contract between the exporter of services
located in India and the recipient of services
located outside India will be considered as
export of services if all the conditions laid
down in section 2(6) of the Integrated Goods
and Services Tax Act, 2017 (IGST Act for
short) read with section 13(2) of the IGST Act
are satisfied.

2. It is clarified that the supplier of services
located in India would be liable to pay
integrated tax on reverse charge basis on the
import of services on that portion of services
which has been provided by the supplier
located outside India to the recipient of services
located outside India. Furthermore, the said
supplier of services located in India would be
eligible for taking input tax credit of the
integrated tax so paid.

3. Thus, even if the full consideration for the
services as per the contract value is not
received in convertible foreign exchange in
India due to the fact that the recipient of
services located outside India has directly paid
to the supplier of services located outside India
(for the outsourced part of the services), that
portion of the consideration shall also be treated
as receipt of consideration for export of
services in terms of section 2(6)(iv) of the
IGST Act, provided the:
(i) integrated tax has been paid by the

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supplier located in India for import
of services on that portion of the
services which has been directly
provided by the supplier located
outside India to the recipient of
services located outside India; and
(ii) RBI by general instruction or by
specific approval has allowed that a
part of the consideration for such
exports can be retained outside
India.

Illustration: ABC Ltd. India has received an
order for supply of services amounting to $
5,00,000/- to a US based client. ABC Ltd. India
is unable to supply the entire services from
India and asks XYZ Ltd. Mexico (who is not
merely an establishment of a distinct person
viz. ABC Ltd. India, in accordance with the
Explanation 1 in Section 8 of the IGST Act) to
supply a part of the services (say 40% of the
total contract value). ABC Ltd. India shall be
the exporter of services for the entire value if
the invoice for the entire amount is raised by
ABC Ltd. India. The services provided by XYZ
Ltd. Mexico to the US based client shall be
import of services by ABC Ltd. India and it
would be liable to pay integrated tax on the
same under reverse charge and also be eligible
to take input tax credit of the integrated tax so
paid. Further, if the provisions contained in
section 2(6) of the IGST Act are not fulfilled
with respect to the realization of convertible
foreign exchange, say only 60% of the

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consideration is received in India and the
remaining amount is directly paid by the US
based client to XYZ Ltd. Mexico, even in such
a scenario, 100% of the total contract value
shall be taken as consideration for the export of
services by ABC Ltd. India provided integrated
tax on import of services has been paid on the
part of the services provided by XYZ Ltd
Mexico directly to the US based client and RBI
(by general instruction or by specific approval)
has allowed that a part of the consideration for
such exports can be retained outside India. In
other words, in such cases, the export benefit
will be available for the total realization of
convertible foreign exchange by ABC Ltd.
India and XYZ Ltd. Mexico.

2. It is requested that suitable trade notices may be issued to publicize the contents of
this Circular.
3. Difficulty if any, in the implementation of this Circular may be brought to the notice
of the Board. Hindi version will follow.

(Upender Gupta)
Commissioner (GST)